The Hindu Business Line : Gold futures may rise

Gold futures ended sharply lower on Friday due to a variety of reasons. A sharp fall in copper futures rubbed off on precious metals followed by a fall in oil prices and a strong recovery of the dollar.

Economic data during the week gave rise to expectations that Federal Reserve could quickly resume its credit tightening policy and start raising rates from its next meeting in September. Neither a foiled terror attempt in London, nor the on going tensions in West Asiahad any positive impact which normally helps gold prices, as gold, has been mainly taking their cue from oil recently as part of a broader commodities-based play.

COMEX gold futures have been choppy throughout the week. Failure to close above $665 levels followed by a break of support at $647/48 can see a deeper correction to $633/35 being a rising trend line support point or even lower towards $625-28 levels in the coming week.

Prices are still in a consolidation and we continue to favour a breakout higher as long as $615 remains undisturbed. We believe that the third wave could have ended at $732 and the corrective fourth wave possibly ended at $546. The current impulse shows signs of fifth wave in progress.

It could also become an irregular wave "B" if prices fail to go above $680 and subsequently dip below $594, which we do not favour. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator suggesting bullishness to be intact.

Prices are below the short-term 8 period EMA at $653 indicating short-term bearishness followed by the 34 period EMA at $638. Therefore, look for COMEX gold to test the support levels and rise higher subsequently.

Supports are at $638, 633 and 625. Resistances are at $648, 656 and 667.

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